Hello, everyone. Good afternoon, and welcome to this next virtual session of the 19th Annual Needham Tech, Media, & Consumer Conference. I'm Ryan MacDonald, and I lead Needham's EdTech research efforts here. And with me in this session, I'm pleased to be joined by Instructure, and we've got CFO Peter Walker, Chief Strategy Officer Mitch Benson, and VP of IR Matt Wells. Gentlemen, thanks for joining me today. Of course. Thanks for having us. Absolutely. So we've got about 40 minutes for a fireside chat session here. So for those listening in, thanks for joining us, and if you do have questions for the Instructure team, please insert them in the chat box, and we'll make sure to get those asked and answered. And we'll save it about the last 10 minutes or so for that audience Q&A. With that, let's jump right in. So Mitch, Peter, for those who might not be familiar with Instructure, how about a brief overview of the business? Sure. Thanks, Ryan. Maybe if it's helpful, you know, I've been with the company for 10 years. It predates the first IPO, and we've been through this, a fairly long journey, right? When I started the company, we were less than $100 million in revenue. Mm-hmm. And here we sit today, having gone through two IPOs, a take private, some massive transformation of the underlying financials of the business, right? Refocus on education, to, you know, 2024, somewhere around the $650 million-$660 million mark, and on our path to $1 billion, over the course of the midterm plan that we've laid out. So it's a business that, one, I have a lot of history with, but two, that has been, you know, pretty successful, as it relates to vertical software. You know, this company is the leading provider of education technology solutions, which, you know, is sort of simple speak for... We deliver all the systems that manage teaching and learning, right, inside and outside of the classroom. It's anchored by Canvas, the learning management system, which was our first product, certainly not our only product today, but anchors the platform that institutions worldwide, K-12 and higher ed, are using for the delivery of their instruction, their assessment, sort of managing the life cycle of a student. And now, you know, lots of professional learning organizations and higher ed institutions are using it to amplify their impact with these non-traditional students, the folks that are showing up not to get their high school diploma or two-year or four-year degree, but coming for shorter-form courses or certificates or programs, and those kinds of things. So we've got a company today that is really focused on that domain of teaching and learning across the life cycle from K-12 to higher ed to lifelong. Mm-hmm. And now, you know, with the addition of Parchment, which I'm sure we'll get to at some point in the later conversations, a whole additional platform that allows us to expand what it is that we do for institutions in managing the evidence of learning, as well as the relationship with learners across their entire life now as they build that portfolio of skills, and not just kind of what they know, but the demonstration of what they know and the skills that they have. Absolutely. Yeah, and a great overview there, Mitch. Appreciate that. Hey, let's dive into just to sort of recent events and start with earnings and Q1 earnings. Mm-hmm. Peter, you had a nice beat to start the year, and with organic growth coming in about 6.8% versus, I think, original full-year expectations were around 5%. What do you credit the organic outperformance to, to start the year here? Yeah, appreciate the question, Ryan. So, you know, we were really pleased with our Q1 results. Every quarter that the company has been public, we have beat and raised, and so I think Q1 is just another proof point of our philosophy there. You know, in terms of overall performance, we did see really strong performance in our subscription and support revenue, where the organic growth rate there was 7.6% year-over-year. So our big focus is on ARR and ARR growth. We also shared on the call that for Q1, and we expect for full year, that for the pro forma ARR of Parchment and Instructure combined, we expect the growth to be high single digits for the year. So really a big focus on recurring. In terms of the full-year guide, we are at a full-year guide organic growth rate of 5%. We have factored into our guidance some of the macro changes, obviously facing higher ed, that we shared mid last year in North America, and then we shared about higher ed in Q4. So that's factored into our guidance in the back half of the year, arriving at 5% organic for the full year. Yeah, makes sense. And yeah, I mean, on that point of 5% organic growth for the year, I'd be kind of curious, as you look at sort of sales cycles and then maybe some of the go-to-market changes you're making for some of the sales cycles, I mean, what are we seeing there? Are we seeing any elongation, shortening? Are they staying relatively the same? What's, what sort of are you seeing early in the year on the sales cycle progression? Yeah, we've got a kind of continuation of the pattern that we've talked about for the last couple of quarters, where the mindshare of university provosts or K-12 superintendents, right, is on a whole host of things in the macro, not just the macro financial, but whether it's regulatory pressure, or it's the enrollment of foreign students, or take your pick, right? I mean, the pressures are huge if you're leading one of those very large enterprises. And what they're telling us is that, you know, there's been more RFPs on our books than we've seen in the past, right? Which says that the demand is high, it's just the decision cycles are taking longer. And the reason for that goes back to that, you know, changing demographic, changing enrollments, the non-traditional students. These folks are saying, "Listen, this is a really, really, really strategic decision for us. It's gonna involve more people- Mm-hmm ... more people higher up in the organization. The process is gonna take a little longer than maybe just a simple LMS replacement historically- Yeah, yeah ... which we think bodes well for us, right? We've got a set of solutions- Mm-hmm ... not just Canvas, but a whole host of other things to bring to the table, which we think, you know, bring us to a place where we've got a much more strategic level of importance to the university as their partner in enabling kind of their growth long term, right? Or to the K-12 systems in understanding what their class sizes are gonna look like and how to use technology to amplify the quality of teaching, right, that already sits in front of the classroom, but is now having to serve more students than it's ever served before, right, in the average classroom. Yeah. So, we're just entering the sales season in this education business in Q2 and Q3, so I think we'll get good signal on the velocity on the sort of mind share that we're able to garner. And I think we've built a plan, factoring in all of the things that we've seen over the last three quarters, and that's what we've communicated out to everybody. But, you know, Q2 and Q3 will give us much more signal on where we are in that cycle. Mm-hmm. And maybe before we dive a little bit deeper into some of the unique market dynamics across your end markets, as you think about the strategic nature of these deals, and what you're seeing sort of enter the pipeline, regardless of how long it takes to close or not, would you generally expect that given the strategic nature, that the ACVs on these deals are looking much larger than what you've historically seen at Instructure? Yeah, your characterization is much larger. It's hard for me to Yeah ... to sort of get behind one way or the other, right? Yeah. But, in general, the nature of our deals are more than one product in the deals- Mm-hmm ... which by their, you know, very definition mean that they're bigger, right? Mm-hmm. The conversations are much more strategic, in the sense of what solution- or what problems are we trying to solve, are much more than how do you produce an LMS for a resident student or a, you know, a K-12 enrollee, right? A K-12 student. Mm-hmm. So yeah, I think in general. Mm-hmm ... we see the deals as bigger in quantity, bigger in dollars, and headed in the right direction for us. Yeah. That's great. Okay. And I think the- Oh, go ahead. ... maybe the only data point I would actually, you know, add to that, right, is, we've talked about retooling our go-to-market organization, and part of that retooling is making sure that, within higher ed, we have a team that is focused, on middle markets, right? We've been highly successful with enterprise clients. There's still lots of opportunity with enterprise clients in higher ed in these larger sales. Mm-hmm. But also that middle market is a big focus for us going forward. That's really helpful. Okay. And then maybe so as we dive deeper into what's kind of going on in higher ed right now, you know, because I think it'll help investors really understand the dynamics within your end markets, not only in 2024, but also over the next few years here. So to start, you know, we have this FAFSA fiasco going on where a lack of completions is creating that, a fear that enrollments could be down as students defer education until they have more visibility into their financial aid, naturally. So, maybe as a reminder for investors, how much of an impact does enrollment changes have on your contracts, and why or why not might FAFSA be a headwind for Instructure? Yeah, you wanna start there, Peter? Yeah, happy to. So our contracts are multi-year contracts, paid annually upfront. The FTE count in higher ed is set at the beginning of the contract and is held constant for the contract period. So really, the part of our business that would be exposed here would be the renewal book for the year. Contracts are generally three-five years in nature, so you can kind of back into what that looks like. Mm-hmm. And then the other thing to think about is the data source that is the independent source of FTEs that drives the user count. They're typically 12 months in arrears, right? Mm-hmm. So, I think there's, you know... So again, the impact is, I would say, very manageable in terms of any given year, and with this, you know, current financial aid debacle, I don't see it having an impact this year to us. And hopefully, it works itself out, 'cause it's- Yeah ... obviously a nightmare for parents and kids right now. Yeah, absolutely. Thankfully, we're starting to see some improvements in completion, but, you know- Yeah ... we'll keep an eye on the situation. As we look out into 2025, though, you know, maybe the hits keep coming for higher ed, if we will, because there's obviously this impending enrollment cliff. You know, as we think about that, and do you think it represents greater risk to Instructure's business as a result of lower structural enrollments? Or, you know, it creates sort of an enhanced risk of university closures, or more of an opportunity as universities look for new ways to attract new non-traditional learners and generate new revenue streams, you know, say, from online degree content, you know, as they're sort of having to evolve with this environment? Yeah, there's a lot in there, Ryan. Yeah. And you and I have talked through a bunch of this too, in you know, quarters and months past. Mm-hmm. You know, the headwinds are real. Setting aside, you know, near-term regulatory pressures or FAFSAs, you know, there's a lot of headlines that are ripe with the imminent demise of higher education, right? Yeah. I think they're overblown. I think, you know, the this slow roll-off of enrollments in higher education that are either flat to declining in, you know, this year, or next year, or the year after, like, the comments of Cliff would lead you to believe that there are, you know, 10%, 20%, 30% enrollment declines that are gonna happen, that everybody's gonna suffer from, and I don't see that that's the reality that we see, right? Mm-hmm. I think we've been very planful over the course of the last 15 years of this business- Mm ... to understand the kind of shifting demographics, the enrollment trends, the slow roll-off of the traditional enrollments- Mm ... to make sure that they're accurately captured in the plan that we've been able to deliver on for the last however many quarters, and that we plan to deliver on moving forward. You know, you sort of led the witness there a bit into the opportunities that might, that might exist, right? And, I didn't want to be all doom and gloom, you know? Yeah. Yeah, yeah. No, it's beautiful. I like our position in being able to service the learners in whatever way that they show up, you know. If I take a quick bird walk back for a second to the FAFSA headwind, let's assume for a second that it is an absolute debacle. Yeah. Do we think that every student's just gonna take a gap year? ... yeah, probably. Right? Or do we assume that probably not, you know? Yeah. I've got a kid who's in college now, luckily, and a few more on the way. My guess is that if presented with the opportunity, you know, with the challenge that this might represent, if it were to continue, those kids would be enrolling in the community college that's local, or they'd be enrolling in short-form courses, or they'd be doing some skills-based development that would earn them some credits in the near term, regardless of their enrollment status as a full-time student. And in every one of those instances, we're well-positioned to be the platform that helps whoever the institution is, right, to deliver those learning experiences, and that means, you know, we're building the business and growing the business with the learners wherever and however they show up. Yeah. So, you know, I like our opportunities and the focus around non-traditional, that macro trend that's happening in general, and even in response to these nearer-term, you know, challenges, whether they're regulatory challenges or things like the FAFSA. So I, you know, I think we've got a good, durable core business that continues to grow, respectably. Yeah. We've got a lot of growth opportunities, you know, one of which in higher ed is around these non-traditional students- Yeah ... that we're seeing grow really, really well. Yeah, absolutely. And as we think about maybe other industries or alternative solutions where higher ed institutions had previously partnered with, you know, the OPM market sort of comes to mind. Yeah. That's one that's been fraught with regulatory concerns, financial struggles. How do you see that impacting your opportunity and your pipeline of opportunities for offerings like Catalog, credentialing, Pathways, if at all? Yeah. It's certainly an opportunity. Mm-hmm. Right, and I think we'll let the regulators and the, you know, the businesses and the, their customers, the institutions, kind of sort out where that all lands- Mm ... and what role they have moving forward. But our role becomes even more important, especially as these institutions, right, who are those OPMs customers, seek to repatriate some of those programs that they otherwise outsourced, as they begin to service them themselves, or as they begin to pick apart the capabilities that those OPMs provided and parcel them out to providers. We sit right at the core of that agenda. Mm-hmm. Certainly, we service some of those OPMs with technology in the past and today- Mm ... just like we do with the institutions. The conversations we're having with, you know, university presidents, with provosts, with chancellors and vice chancellors on the global scale, is that, they believe that in this- Mm ... post-COVID era, they have a whole host of skills that they didn't have a decade ago, right? Yeah. A whole host of capabilities in their instructional population, in the content that they produce, the courses that they've curated, that they can deliver, and they'd like to do that on a consolidated platform, that is Canvas, and Studio, and Credentials, and Catalog- Mm ... because we're already serving their traditional institution students that way, right? And so when they can use the same tech, and reach multiple audiences, and do so in a way that's already familiar to them, that's the conversation we're having, and we've got lots and lots of examples where, you know, that's happening. And it's also- Mm ... part and parcel of those elongated sales cycles, right? Mm-hmm. As they're saying, "We wanna solve these bigger problems. We want to bring in all of the tentacles from across the university into a consolidated strategy. Mm. Lucky for us, you know, we're the kind of strategic partner of choice in those conversations. Yeah, that's great. So bringing this all sort of- Yeah ... back to, like, how Instructure can sort of operate effectively in this environment, you know, we've been hearing a lot of... You know, given all these sort of various factors, that mixed feedback on, like, university operations in terms of some large art institutions being able to turn profits, while many others operating in the red. I mean, so as you were evaluating the market landscape, any way to separate the haves and the have-nots right now? And how are you prioritizing sort of which universities to engage with and institutions to engage with and go after from a go-to-market perspective, and build those relationships so you can win, win deals now, but also be present as schools start to rebound down the road? Yeah. Certainly, I think we should all worry about the solvency of our higher ed environment, right? Yeah. Be concerned about the institutions to which we send our kids, where we send our, you know, dollars, how we lobby our state legislators. I mean, I think, I would hope that we're all activists, right, in that environment to make sure that we've got a highly sustainable and modern, future-focused infrastructure to support the next generation of kids. Like, you know, so I'll get off the soapbox on that front for a second. I spend a lot less time when we, you know, Peter and I, and Steve, manage this business, and our whole leadership team, a lot less time worried about the haves and the have-nots as far as revenue versus not revenue, who's in the black versus who's in the red- Mm ... and a lot more time focused on the wants and the want-nots, right? Who has the vision? Mm-hmm. Who is engaged in the transformational conversations about what they want their university to become? And we've got countless examples of those progressive leaders- Yeah ... who are saying, "We see what the future looks like, and the future looks like much more atomized learning. It looks like much more access on a global scale, not just the blast radius of my physical campus. Mm. It looks like a digital-first mentality, meeting students where they are and not demanding residency, right? And in those instances, we're being pulled into and driving, you know, as a partner, the conversations around what that looks like, and what has to change, and how does our technology support it, how does it have to change to meet the increasing demands that that sort of future is gonna look like? So I think, you know, it's. We've got a lot of examples. We talked about some of those in our last quarterly call. Mm-hmm. Perhaps even on the kind of solvency issue, you know, I'll point you at one of the wins that we had, not even in this country. It was down in Australia, where two universities decided to merge. Mm. There's lots of reasons that can and will happen at every level of the college, university, the vocational school sectors across the globe... and aside from their motivation, it represented an opportunity for us to bring those universities together and serve a broader student population- Mm-hmm. Right? With a bigger deal than we had with one of those universities previously. And I think it, you know, one more good example of many products, merging universities, changing landscape, benefits this business because of the position that we've built. Yeah, it's really interesting, and I certainly believe that we will see consolidation in the U.S. market when you think about- For sure ... New York having more university institutions than the U.K., and they will have more than all of Canada. Right. You know, there is some room for that. Yeah. Let's talk about some of the go-to-market changes that you've made sort of to help- Yeah ... drive the success. You bifurcated the resources into land and expand motions, aligned incentives around driving more bundled deals. Now, you only kicked these off in January, so it's a bit early, but curious to know, like, what are some early signs of progress you might be seeing? And Peter, you know, what metrics should we be tracking to sort of gauge productivity and success of these changes? Yeah, so in terms of the compensation alignment, I think we're really pleased with what we've seen in performance there. One of the places we were focused was increased pipeline generation in our higher converting sources. Mm-hmm. Our CSM team is a higher converting source, and we saw a significant increase Q1 versus Q1 last year there. Mm-hmm. Another place we were focused on in aligning compensation to goals was focusing on recurring bookings. Mm-hmm. You know, compensation, you know, higher related to recurring bookings, and again, seeing some great performance year-over-year there in terms of higher bookings targets, recurring booking targets per reps. Mm-hmm. And then the other place that we focused on was segmentation of markets. We created a team focused on our platform ecosystem- Mm-hmm ... business that we talked about at Investor Day, and also focused on global non-traditional. Q1 for global non-traditional for the professional learning piece of the business is less cyclical, and we saw some really nice bookings performance there. So, you know, I think early indications are what we've done is working well. There's gonna be tweaks around the edges as we work through the year, as you would expect with anything new, but I think overall, we feel really good about it. I mean, obviously, land and expand was kind of, you know, at the base of the strategy with all of these other changes on top of that. No, that's great, and I mean, clearly we could start to see some of that and some of the multi-product deal wins that we had in Q1 here, so- Right ... and it's good to see, and looking forward to kind of watching that as we progress throughout the year. Let's shift to K-12. You know, there's also plenty of interesting things going on in the K-12 market. And so, you know, there's clearly been some spending tailwind this year, I think, with districts and schools sort of rushing to spend the remaining ESSER III funds. I think the latest data shows there's probably about 30% of that left. Just curious to see, you know, hear what you're seeing in the K-12 market right now, and what sort of ESSER exposure, if you will, do you have on that side of the business? Yeah. Our K-12 business is typically funded out of the, you know, standard operating budgets of school districts. Okay. I think we've been very intentional and careful in helping districts understand that one-time funds. Yeah ... don't fund critical infrastructure for the long term. Mm-hmm. You know, we did see a fairly sizable growth in our K-12 install base, as you would expect during COVID. Yeah. I think some people's concerns about the durability of that long term should be assuaged at this stage in the game based on the, you know, first renewal cohort that came through last year, and the second one that's coming through this year and looking quite positive. Mm-hmm. Which says to us, both through the conversations and by the, you know, sort of points on the board, right? Yeah. This is technology that's essential infrastructure for the operation of a modern K-12 enterprise. You know, ESSER, in general, I think provided a favorable backdrop for technology, in the sense that, you know, there were more dollars in the system, there was a little bit of freedom to experiment, figure out what worked. Yeah. Of course, with the expiration of those funds, some hard choices are gonna have to be made by school districts who, funded things that maybe shouldn't have been funded with one-time funds- Yeah ... who are now gonna have to rationalize their spend against the, the highest ROI, the most impact for students. So I would expect that, that will happen. We don't see that as material to the renewability of our business, nor significant as headwinds to the, to the ongoing growth of the business, as folks- Mm ... continue to graduate into an enterprise-class LMS, like Canvas, which manages, you know, more than just the productivity that happens in any given classroom. Mm-hmm. So, you know, K-12, it too is subject to its challenges that come and go or ebb and flow. This will be another one for the, you know, the core of K-12, but as it relates to our position, I think we're relatively happy about where we're funded from, the velocity that it added to the digital transformation, and the value that folks were able to realize from understanding what, you know, what the digitization or what technology can do to help with transformation and scale within their systems. Yeah, I think that often gets overlooked in the market sometimes today is... Look, it's very, very difficult for a school to operate without an LMS, and- Right ... or even with a free competitive offering, if you even want to call it- Yeah ... competitive out there. There's still a lot of, I think, pain of trying to rip and replace a solution because of how ingrained it is to the data. Yeah. So I think- For sure ... well said. Maybe one thing I'd add there real quick, Ryan, if you don't mind. Yeah ... the advertisement for a second. I mean, I'll remind folks that we bought a company in 2020 called LearnPlatform. Yep. Right? And the fundamental component of LearnPlatform's business, one of the fundamental components, is helping school leaders and classroom teachers understand the kind of, the state of technology that they- Mm ... have deployed, what's being used, who's using it, how much it's being used, and the kind of impact it might be having on student outcomes. So in today's day and age, where folks are trying to figure out what works and how to consolidate, how to rationalize spend-... I also like our position as being both the trusted intellectual partner, but also the software provider that kinda- Yeah helps them, right, figure out what that looks like. And I think it just adds to, to sort of the overall value that Instructure brings to the relationship with, with the K-12 schools in particular, and eventually with higher ed. Now, you took the next question out of my hand. So I'm gonna alter it a little bit here. So, I mean, I think if you look at ESSER III in particular, the main target was to close learning loss gaps, right? Right. And here we are three years later, and we haven't really made much progress on that. And so I would think over time, as we need to consolidate the usage of tools, having a solution that, one, obviously can help the student learn, but assess how the student's learning with, with your assessment tool, with measuring what EdTech tools could be impactful and, and are actually resulting in better outcomes, I, I think that sounds like a pretty valuable value proposition for schools moving forward. So, you know, how are you positioning yourself from a go-to-market perspective, to sort of maybe capture maybe incremental demand as during a consolidation trend- Yeah ... you know, as schools need to actually try to close those gaps, you know, now, but not having a whole bucket of funding to do so? Yeah. Yeah. So a couple of things on that. I think, it's part and parcel of the evolution of our global customer operations under Chris Ball, right, is generalist sellers responsible for an account, supported by specialists. Because, you know, assessment is a specialized conversation. Even the technology can be a, you know, specialized conversation about how to analyze usage and what's being impactful. Experts in understanding the data that are produced to help, you know, folks understand what the data are telling them. So I think our motion is designed in that consultative, solutions-oriented approach, right, with each of these K-12 customers in particular, to help them understand and make best use of all of the solutions that we have across the learning life cycle, as well as the management utilities underneath. The thing you didn't ask about, which I think is equally important in understanding the impact, is that we now also, with that acquisition of LearnPlatform, have the ability to do evaluations of third-party tools and their impact on actual outcomes inside classrooms, right? And to do so in a rapid fashion rather than, you know, a multi-year, multi-million-dollar, highly staffed, you know, entirely academic sort of approach to the evaluation of the impact of tools, right? And so we're finding a great deal of traction in working with those third-party providers. Our community of 1,000 partners is getting bigger and bigger and bigger every day as more and more folks are coming, asking for assistance to provide that evidence directly to those K-12 schools. Look over here, a K-12 system like yours at those grade levels with these tools produce these kinds of results, right? And we can do that for you here, too," is a mighty big sales tool if you're on the, you know, beneficial end of the thing you built actually has an impact, right? And we can facilitate both halves of that conversation and connect both sides of that network. Mm-hmm. That's really helpful. Yeah, it makes a ton of sense. You know, so I'm getting some questions in from the audience, and they're reminding me that I haven't asked about Parchment yet, actually, which there's so much to talk about that we haven't actually discussed it yet. So, maybe help give an update on sort of where Parchment stands in terms of the integration at this point. You know, I think there's a lot of obvious synergies between Parchment and the core business, while also opening up new opportunities within, you know, your existing base of customers to have these more strategic discussions. I'm just curious, like, how early days is the Parchment integration going, and are you starting to reap any of the benefits at this point? Yeah. Peter, you wanna start there? Yeah, happy to. So, the deal model did not assume any revenue synergies from Parchment. The deal model did assume some rather small expense synergies in the back office where you would kind of expect us to synergize. The majority of those have all been implemented and we're on track. Mm. In terms of 2024, we've shared this, in our earnings call, we are running the Parchment go-to-market separately from the Instructure go-to-market. Mm. That is because, you know, the Parchment on its own is a high-growth business. Mm. In the first year, we wanna make sure that they achieve their targets, and it also gives us time to study their go-to-market motion. Mm. Their go-to-market motion is not unlike the go-to-market motion that we just put in place for Instructure. So I think bringing the two together will obviously be synergistic, however we decide to do that in terms of the continuum of bringing the two together. That being said, if you think about the 2024 guide, there is no assumption of cross-sell between Parchment and Instructure in that guide. So that is potential upside. I'm gonna hand it back to Mitch, maybe to cover, you know, what he's hearing in the marketplace- Mm ... about just the enthusiasm of bringing the offerings together and having cross-sell opportunities. Mm-hmm. Yeah, look, Ryan, I'm conscious of time, so I'll do the abbreviated version and point folks back to Investor Day, as well, where we spent a great deal of time talking about the long-term strategy of owning the platform for the delivery of learning, as well as the evidence of learning, how that supports the long-term view of a student across their entire life cycle, in and out of jobs, right, the learning experiences that they will have over time, and building a lifetime relationship with those users, and we think the benefits that that pays. But in the near term... Look, I'm more excited today about that acquisition than I was when we did it, for a variety of reasons, the least of which is, I've spent a lot of time with customers, both here and internationally- Mm ... where they all get it, right? I don't have to explain the why of these two companies coming together like we do in other forums. They totally understand the essential nature of both of these platforms, and why they would come together, and why a richer credential, richer because of the data that exists inside the learning environment, the propensity of it to exist long term and owned by the student, as opposed to being an artifact of each individual institution that they have taken a course from. Mm. Like, they, they innately understand how there's, you know, compounding value there between the organizations. We think there's a great deal of opportunity in extending the network in K-12, in a place that, that Parchment hasn't, to the degree that they have in higher education. Again, as Peter said, not built into, into the model. Internationally is another place where I didn't expect the, the enthusiasm. I was in the U.K. last month. Mm-hmm. met with 40 of the largest universities' leaders there. Wasn't a single conversation in any of those where they didn't ask about Parchment, didn't understand it, and didn't wanna know when they couldn't get it, right? So we think there's some real opportunity there that we perhaps underestimated as part of the deal, and so it's incumbent on us to figure out how to facilitate that and do so without doing harm, right, to the core business that needs to deliver its 2024 numbers. So, yeah, I'm very bullish. That's excellent. Okay, we've appeased the masses. They can put their forks down now. And it's good because we still have time. I'm contractually obligated to ask a generative AI question. Of course you are. Yeah. And I'm gonna switch it up a little bit because we had a really interesting generative AI in education panel yesterday, and I thought one of the interesting topics that came out of it is that, you know, I think when most people think about higher ed views, and even a little bit in K-12 views, is that since generative AI and ChatGPT has really been driven by student usage, and that naturally comes with some apprehension, it goes under the radar about how much teachers are actually interested and fascinated by using the technology. And it's really about getting the teacher to be an internal champion, and then making that connection point to administration with the budgets. How are you thinking about and approaching that topic with teachers versus administration within your customer base? Yeah, it's a great question. And as much as you were obligated to ask the question, I'm also obligated to talk about kind of guiding principles to start with, right? Mm-hmm. Because I think it's important that everybody understands, that this market isn't like every other market. We certainly see AI as a tailwind, not as a massive disruptor that represents existential challenges to the business, right? I think we really think that it's gonna be an enabler, that and transformative and supportive of our, you know, business objectives, which are grounded in: What do our customers want, right? Mm-hmm. So everything we do is intentional. It has to be safe 'cause we're dealing with students, we're dealing with PII in ways that are unlike what happens in the corporate sector. And most importantly, for me, it has to be equitable, right? We don't need one more infusion of technology that extends the distance between the haves and have-nots. So how does this become an enabler as opposed to yet another example of how technology's increasing the gap, right? So that being said, I love the way that you asked the question, because our focus, after spending a couple of years directly with customers- Mm-hmm. ... that's, you know, administrators, it's LMS administrators, it's also teachers, right, and professors. And they told us exactly what you just said, which is the students are gonna do what the students are gonna do. Mm-hmm. Certainly, this technology should get there, and we might wanna put some guardrails around it and all of the things, but the reality is this holds an extraordinary amount of power for amplifying the impact that instructors can have, right? Mm-hmm. Whether that's in increasing their efficiency, giving them access to information in ways that they haven't had it before, helping them offload some of the work that otherwise could be done by the machines, or bringing in new and better tools into the ecosystem, right, in ways that they hadn't been able to utilize them before. So our investments to date focus on exactly those things, right? Mm-hmm. Making sure that we do it intentionally, safely, securely, with respect for the obligations we have as stewards of, you know, important data. Enabling a platform that will help others do all of those kinds of things as well, not just the investment that we wanna make. Layering AI into the existing workflows for teachers and administrators in ways that help them reduce time, free up other cycles, burn fewer calories, right, on the administrative overhead and headaches. Open up data to natural language queries, as opposed to having to be a structured SQL expert to extract the information that you want, and then support our partners. I certainly, if it's interesting, to talk about some of our examples and things like search or, you know, that kind of stuff, but those are the things that we're working on now, and we'll have a lot more to share at our annual user conference in July, InstructureCon in Las Vegas. Well, and even though you're obligated to talk about your guiding principles, I think that's actually really important, because one of the other topics that came up that is, that most institutions or schools today don't, still don't have a governance framework- Right ... for generative AI internally, and they need help and assistance in that. So I think that's as equally as important of a topic right now in driving adoption than even just having the tools themselves, right? Agreed. So, maybe in the last couple minutes, Peter, I just wanna maybe finish with you on, you know, at Instructure, we can talk about growth all day long, but profitability matters as well. Mm-hmm. Instructure has an impressive track record, you know, and you've laid out plans for further adjusted EBITDA margin expansion, even beyond your already impressive, about 40% level. Can you talk about where you see the most opportunity for incremental leverage in the P&L? And as you think a little bit longer on this generative AI discussion, if you use those tools internally, does that structurally make, or create the opportunity to structurally make Instructure a more profitable business over time? Yeah, great question. So in terms of the targets we shared at Investor Day, the contribution of possible upside from AI is not calculated into those numbers because I don't know what that is today, right? Still, yeah. I only commit to things that I can actually deliver against, right? Yeah. But if we think about, you know, what we did, incorporate is, you know, one, we've made a decision to take our workforce as we grow as an international company, to take our workforce more international, right? So we're in the process of doing that this year, and there's gonna be, you know, incremental savings that come out of that. Portion of those incremental savings, we're reinvesting back into business, 'cause we obviously need to nurture the business to deliver 9%-11% organic growth, but it also provides the opportunity for margin expansion. The other initiative we talked about at Investor Day is obviously we are, you know, born in the cloud and have been so successful because we've been in the cloud. That being said, the tools available to you in the cloud move very quickly, right? Some of them have got more, much more cost-efficient, so we are re-architecting our platform, and we're gonna realize savings, as a result of that, and that'll show up in our, in our gross margin. Then, as we spoke about, earlier, there are synergies out of Parchment and G&A which are coming through. So, you know, we've got several levers to pull in terms of reaching profitability, and the fourth one, right, is just scale, right? As you naturally grow from a, you know, call it, $700 million business to a $1 billion business, you don't need two of everything as you do that, right? So, that's also factored into the thought process as we think about expanding margins. Awesome. All right, well, we've covered a lot. It was a great discussion. I enjoyed it all. Enjoyed it very much, as always, I do with you guys. So thank you so much for taking the time today to sit down for the Fireside Chat. Thanks for participating at our conference, and thanks to everyone in the audience for, one, reminding me to ask about Parchment, also, please, participating in the actual Fireside Chat as well. So we'll leave it there. Awesome. Thanks, everyone. Have a great day. Thank you, Ryan. Thanks. Thanks, Ryan.